ITW Reports Second Quarter 2015 Financial Results

Company raises full-year guidance to $5.07 to $5.23 per share, up 10 percent at the midpoint

GLENVIEW, Ill., July 22, 2015 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE:ITW) today reported second quarter 2015 diluted earnings per share (EPS) from continuing operations of $1.30, a 7 percent increase compared to the year-ago period. Excluding the $(0.12) impact of currency translation, EPS would have been up 17%. Organic revenue growth was up slightly in the quarter as continued strong organic growth performance in our Automotive OEM and Food Equipment segments along with improving demand trends in our Construction Products business were offset by the impact of the soft capital spending environment on our Welding and Test & Measurement and Electronics segments. In addition, the implementation of the company’s ongoing product line simplification (PLS) initiative reduced enterprise-level organic revenue growth by 1 percentage point in the quarter.

"ITW continues to execute very well in the face of an external operating environment that remains challenging on a number of levels. In the second quarter, the company delivered solid EPS growth with record operating margin of 21.3 percent and after-tax return on invested capital above 20 percent," said E. Scott Santi, chairman and chief executive officer. "Consistent with our strategy and despite the challenging near-term macro environment, we continue to focus on and invest in executing the steps necessary to position the company to deliver solid above-market organic growth. As we transition into the back-half of our current five-year Enterprise Strategy, we remain firmly on track to achieve our 2017 and beyond organic growth target of 200 basis points or more above global GDP.”

Second quarter 2015 enterprise highlights*

Organic revenue was up slightly for the total company. Growth was positive for both North America and International, with Europe up 2 percent. As expected, the ongoing PLS activities associated with the portfolio management component of ITW's Enterprise Strategy reduced organic revenue growth by approximately 1 percentage point. Total revenues of $3.4 billion were down 8 percent due to the impact of foreign currency translation.

GuidanceThe company is raising its 2015 full-year EPS guidance by $0.05 at the midpoint to reflect second quarter results and current exchange rates. The updated EPS range is $5.07 to $5.23, an increase of 10 percent at the $5.15 midpoint. Excluding the negative currency impact, full-year EPS would be up 18 percent at the midpoint. Organic revenue growth for the year is projected to be approximately 1 percent, which includes 1 percentage point of impact from PLS. Operating margin is projected to exceed 21 percent, an increase of more than 100 basis points year-over-year, largely driven by Enterprise Initiatives. The company expects this strong margin performance to offset modestly lower revenue expectations through the balance of the year. For the third quarter 2015, the company is expecting EPS to be in a range of $1.32 to $1.40 and operating margin to be approximately 22 percent. Third quarter organic revenue is forecast to be flat to up 1 percent.

*All comparisons are to the prior year period.

Forward-looking statementThis earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding organic and total revenue growth, impact of foreign currency translation, operating margins and diluted income per share from continuing operations. These statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated. Such factors include those contained in ITW's Form 10-K for 2014 and Form 10-Q for the first quarter 2015. The attached tables include a calculation of ROIC, a non-GAAP measure.

About ITWITW is a Fortune 200 global diversified industrial manufacturer of value added consumables and specialty equipment with related service businesses. The Company focuses on solid growth, improving profitability and strong returns across its worldwide platforms and divisions. These divisions serve customers and markets around the globe, with a significant presence in developed as well as emerging markets. ITW's revenues totaled $14.5 billion in 2014.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF INCOME (UNAUDITED)

Three Months Ended

Six Months Ended

In millions except per share amounts

June 30,

June 30,

2015

2014

2015

2014

Operating Revenues

$

3,434

$

3,719

$

6,776

$

7,288

Cost of revenues

2,024

2,219

3,994

4,377

Selling, administrative, and research and development expenses

622

677

1,238

1,359

Amortization of intangible assets

58

60

117

122

Operating Income

730

763

1,427

1,430

Interest expense

(55

)

(64

)

(109

)

(128

)

Other income (expense)

21

7

42

16

Income from Continuing Operations Before Income Taxes

696

706

1,360

1,318

Income Taxes

216

212

422

396

Income from Continuing Operations

480

494

938

922

Income from Discontinued Operations

—

998

—

1,043

Net Income

$

480

$

1,492

$

938

$

1,965

Income Per Share from Continuing Operations:

Basic

$

1.31

$

1.22

$

2.53

$

2.23

Diluted

$

1.30

$

1.21

$

2.51

$

2.22

Income Per Share from Discontinued Operations:

Basic

$

—

$

2.47

$

—

$

2.52

Diluted

$

—

$

2.45

$

—

$

2.50

Net Income Per Share:

Basic

$

1.31

$

3.69

$

2.53

$

4.76

Diluted

$

1.30

$

3.66

$

2.51

$

4.72

Shares of Common Stock Outstanding During the Period:

Average

366.2

404.7

371.4

413.3

Average assuming dilution

368.4

407.6

373.8

416.3

FREE OPERATING CASH FLOW (UNAUDITED)

Three Months Ended

Six Months Ended

In millions

June 30,

June 30,

2015

2014

2015

2014

Net cash provided by operating activities

$

448

$

573

$

890

$

887

Less: Additions to plant and equipment

(64

)

(78

)

(147

)

(146

)

Free operating cash flow

$

384

$

495

$

743

$

741

ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF FINANCIAL POSITION (UNAUDITED)

In millions

June 30, 2015

December 31, 2014

Assets

Current Assets:

Cash and equivalents

$

2,858

$

3,990

Trade receivables

2,412

2,293

Inventories

1,191

1,180

Deferred income taxes

185

212

Prepaid expenses and other current assets

387

401

Total current assets

7,033

8,076

Net plant and equipment

1,636

1,686

Goodwill

4,543

4,667

Intangible assets

1,679

1,799

Deferred income taxes

298

301

Other assets

1,159

1,149

$

16,348

$

17,678

Liabilities and Stockholders' Equity

Current Liabilities:

Short-term debt

$

819

$

1,476

Accounts payable

533

512

Accrued expenses

1,147

1,287

Cash dividends payable

178

186

Income taxes payable

61

64

Deferred income taxes

8

8

Total current liabilities

2,746

3,533

Noncurrent Liabilities:

Long-term debt

6,994

5,981

Deferred income taxes

363

338

Other liabilities

939

1,002

Total noncurrent liabilities

8,296

7,321

Stockholders’ Equity:

Common stock

6

6

Additional paid-in-capital

1,113

1,096

Income reinvested in the business

17,755

17,173

Common stock held in treasury

(12,526

)

(10,798

)

Accumulated other comprehensive income

(1,046

)

(658

)

Noncontrolling interest

4

5

Total stockholders’ equity

5,306

6,824

$

16,348

$

17,678

ILLINOIS TOOL WORKS INC. and SUBSIDIARIESADJUSTED RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

More From BioPortfolio on "ITW Reports Second Quarter 2015 Financial Results"

Relevant Topics

The Top 100 Pharmaceutical CompaniesTop 10 biotech and pharmaceutical companies worldwide based on market value in 2015
2015 ranking of the global top 10 biotech and pharmaceutical companies based on revenue (in billion U.S. dollars)
Johnson & Johnson, U.S.
74...

FoodFood is any substance consumed to provide nutritional support for the body. It is usually of plant or animal origin, and contains essential nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals. The substance is ingested by an organism ...